How Mobile-Game Makers Can Survive the App Store Assault

Increasing smartphone usage and the breakthrough of app stores have given birth to a flurry of activity on the mobile-gaming front from both startups like ngmoco and Zynga and major media brands such as Disney, ESPN and MTV Networks. Which makes me wonder how many of the entrenched players are living on borrowed time — and what they can do to stay alive.

Apple’s App Store has given mobile gaming a much-needed lift by coupling a relatively gaming-friendly handset with a revolutionary new distribution model.ComScore earlier this year reported the number of mobile game downloaders in the U.S. grew 17 percent from November 2007 to November 2008, with iPhone owners accounting for 14 percent of all game downloads in the most recent month — despite the fact the device held a mere 1.1 percent market share worldwide. Titles for the iPhone now account for 10 percent of the U.S. mobile gaming market, according to Screen Digest.

That trend is surely extending beyond the iPhone as the Palm Pre, Android devices and new BlackBerry models — among others — gain traction. Not only are the gadgets much better equipped for games than typical 12-key phones, the app stores that support them are much more attractive to developers. App stores typically offer drastically better revenue splits than games distributed through the operators home page (generally known as the deck), they usually don’t require a carrier relationship and — at least in the cases of Android and the iPhone — they don’t subject publishers to the costly proposition of porting a game across a wide variety of handsets. (While operators often demand publishers produce a variety of versions of a game to support dozens of handset models, a developer can build a single version for the App Store, another for Android, etc.)

Entrenched mobile-game makers like Gameloft, EA Mobile and Glu have built their business models on impressive worldwide carrier partnerships and extensive porting businesses — two assets that are becoming less valuable with every iPhone download. It’s true that Gameloft and EA, particularly, have capitalized on the iPhone impressively, giving their businesses a major boost. But they’re likely to lose ground in smartphone gaming as the startups and major media companies like Disney and ESPN chip away at market share. (And if you don’t think big, non-gaming brands can make a dent in gaming, take a look at efforts from Burger King, which has created a new revenue stream and extend its brand through branded console titles at $4 a pop.)

So what’s an entrenched publisher to do? I think there are several smart strategies:

  • Continue to embrace the new features and technologies of smartphones. Touchscreens, accelerometers, cameras, Wi-Fi, GPS — each can be integrated to enhance the gaming experience. Lesser game makers may not have the resources (or smarts) to capitalize, so leverage your experience and be creative and innovative with the high-end gadgets.
  • Build your brand. EA has a substantial edge here, obviously, but Glu and others still have an opportunity to become the publisher of choice for mobile gamers. I think it’s fantastic that the guys in the garage can now compete, but some brand awareness among consumers still goes a long way.
  • Help the industry continue to build better feature phones that rely on the carrier deck instead of app stores for distribution. The lines between feature phones and smartphones are blurring, and some low-end phones can now offer pretty good gaming experiences. Exploit that, even if it means lowering price points (which are often incomprehensibly high anyway).
  • Use your porting experience to be in every app store and on as many decks as possible. It’s expensive, yes, but when we finally find a true hit mobile game — yeah, Tetris and Pac-Man have done well on phones, but the mobile platform has yet to produce its own blockbuster — be ubiquitous so you can fully leverage it.

Question of the week

How should entrenched mobile-game makers thrive in the era of the app store?